In order to complete a transaction for the purchase of goods or services, the buyer and seller typically must agree on a purchase price, and the buyer must tender the purchase price to the seller. Typically, the buyer tenders the purchase price using currency (i.e., paper currency, coins or both) or some electronic form of payment, such as a credit card or debit card. When currency is utilized to pay a purchase price that is not a whole-unit amount, such as a whole-dollar amount, the buyer will often receive change back from the seller in the form of coins, and possibly paper currency, to cover the difference between the tendered amount and the purchase price. The fractional cost of the transaction is the amount that the purchase price exceeds a whole-unit amount. For example, if the purchase price for a transaction is $5.60, then the fractional cost of the transaction is sixty cents ($0.60).
While the increase in electronic transactions has greatly reduced the amount of transactions involving traditional currency, the nature of many transactions makes them unsuitable for electronic payment. Many consumers, for example, do not have access to a credit card or a debit card. In addition, the nature of many transactions makes them unsuitable for electronic payment. For example, the transaction costs associated with electronic transactions often discourage sellers from accepting electronic payment for a relatively small purchase. In addition, many point-of-sale (POS) terminals that process such transactions do not include the necessary equipment that is required to process electronic transactions, such as a card reader and a network connection to an electronic transaction processor, especially for remote POS terminals that typically process only small amounts, such as vending machines. Thus, for the foreseeable future, some percentage of transactions will continue to be paid for using traditional currency.
Buyers and sellers alike, however, do not like to deal with coins. The exchange of coins between buyers and sellers typically slows down the transaction. Sellers must maintain a sufficient amount of coinage in each possible denomination in order to provide proper change for each transaction. In addition, sellers must typically roll excess coins in order to deposit them in the bank. Buyers must deal with the inconvenience of carrying coins, and often accumulate large amounts of coins, such as in a jar or coin bank at home. Thus, the significant amount of coins that are out of active circulation at a given time requires the government to produce even greater amounts of coins, further increasing societal costs. A need therefore exists for a method and apparatus for processing coinless transactions.
U.S. Pat. No. 5,869,826 to Eleftheriou discloses a system for conducting coinless transactions that utilizes a magnetic stripe data card that interacts with a POS terminal. In the Eleftheriou system, the fractional transaction cost of a purchase is compared with an existing change balance stored on the data card. When the change balance does not cover the fractional cost of the transaction, a change renewal algorithm automatically increases the balance on the card by an amount equal to the difference between the cost of the transaction and the next highest whole dollar amount. This amount is also added to the transaction cost, raising it to the next highest whole dollar amount. Likewise, when the balance of change stored on the card does cover the fractional dollar cost of the transaction, the system provides a change depletion algorithm that automatically decreases the balance on the card by an amount equal to the fractional dollar cost of the transaction and deducts a corresponding amount from the transaction cost, lowering it to the next lowest whole dollar amount.
While the Eleftheriou system results in a whole dollar cost for the transaction and eliminates the requirement to exchange coins of any denomination for commercial transactions, the Eleftheriou system suffers from a number of limitations, which, if overcome, could further reduce the number of transactions involving coins. Specifically, the Eleftheriou system requires a buyer to carry at least one card in order to process the fractional costs of each transaction. Each buyer could conceivably be required to carry additional cards, however, if all sellers do not adopt a uniform protocol for processing fractional transaction costs in this manner. Furthermore, the Eleftheriou system requires the POS terminal to include a card reader that interacts with the data card to process the fractional transaction costs.
A need therefore exists for a method and apparatus for processing coinless transactions that does not require the buyer to carry a data card. A further need exists for a method and apparatus for processing coinless transactions that does not require the POS terminal to include a card reader.